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GEM - G8 Education

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Dissention in the G8 camp???

10:40am: Owning shares in the best-performing stock among the top 200 companies in the local bourse was not reward enough for almost one in five G8 Education investors, who voted against the salaries paid to the childcare operator’s top executives in 2013.

The executive director of proxy advisory ISS Ulysses Chioatto said the group advised its clients to vote against the remuneration report because of loans provided to executives.

“Our concern is that they have an unusual loan structure being used to pay executives on top of their fixed salary,” he said. “The loans have no performance measures.”
http://www.smh.com.au/business/mark...-ma-targets-20140430-37gk9.html#ixzz30LyFrh57
 
McLovin said:
This is a little strange...



Reading the entire article, it seems like these guys just try their hand at whatever.

http://www.afr.com/p/business/companies/chris_scott_and_his_secret_network_8GKvKCCsm58NyOMz6EuPLK

I don't trust any of these roll up business models. Although the growth is cheap, it's not organic, it's purchased and like everything else once the low hanging fruit is bought multiples paid will have to start rising. Then the fat lady will start wailing.
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McLovin would you by any chance have a copy of this full article as I am not a subscriber to the FR. I am interested as I have just read the latest GEM ASX announcement relating to Geosine. Please post it in my notifications folder. Thanks
 
I've held this stock for some time with an average purchase price of under $3.. During that time GEM has gone as high as $5.63 and today as low as $3.54, with a rebound as I type.

Is there concern about debt levels or expansion that is too rapid? Or am I missing something else entirely?

Comments would be appreciated... Wondering whether it's time to cut and run...

Many thanks for any observations.
 
Muschu said:
I've held this stock for some time with an average purchase price of under $3.. During that time GEM has gone as high as $5.63 and today as low as $3.54, with a rebound as I type.

Is there concern about debt levels or expansion that is too rapid? Or am I missing something else entirely?

Comments would be appreciated... Wondering whether it's time to cut and run...

Many thanks for any observations.
Click to expand...


I have attached a fundamental view from Lincoln indicators Stock doctor as their summary as well as my own technical view and weekly chart...might help your decision. They have a current valuation of $5.64 but the chart seem to show it will move lower in the short term at least.

GEM is both a Star Income Stock and Borderline Star Growth Stock in a Satisfactory position of Financial Health. The company could suit both growth and value focused investors that seek capital appreciation, and income focused investors willing to take on a little more risk in order to maximise dividend yield. GEM has grown its market capitalisation in recent years, and has established a relatively high level of liquidity that would suit most investors. At current prices, GEM's dividend is attractive, and offers investors a quarterly income stream. The company has displayed enviable growth rates in recent years, but the balance sheet has also been expanding at a formidable rate, and we would like to see both profits and cash flow generation catch up in coming periods. We believe the investment theme behind GEM’s model is very strong, and expect it to meet Star Growth Stock criteria in the coming 12 months.

GEM weekly trading chart.jpg
 
I disagree with Lincoln indicators.

I have it ranked poorly overall. A poor value stock with nothing interesting happening, momentum wise.
 
systematic said:
I disagree with Lincoln indicators.

I have it ranked poorly overall. A poor value stock with nothing interesting happening, momentum wise.
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We all have our own views .

That's why I put the chart up as well. I myself trade on what the technical's are telling me and at present it is in a downtrend.:2twocents
 
Thanks for the comments - which I do appreciate.

I thought it interesting on an UP day that GEM dropped so low, but then rebounded to be up over yesterday to be up over 2.5% as well as finishing near the days highs.

My holding is not that large and I'll keep observing.

Again, thank you.
 
Muschu said:
Thanks for the comments - which I do appreciate.

I thought it interesting on an UP day that GEM dropped so low, but then rebounded to be up over yesterday to be up over 2.5% as well as finishing near the days highs.

My holding is not that large and I'll keep observing.

Again, thank you.
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Another poor day for GEM on a good day for the majority of the market... Beyond my understanding - as many things are.
 
SuperGlue said:
Recent article in the newspaper again and today's announcement of director decided to step down.

Wonder whether this two are related?

http://www.smh.com.au/business/inte...he-market8217s-best-sell-20150312-1427lj.html
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Muschu said:
Another poor day for GEM on a good day for the majority of the market... Beyond my understanding - as many things are.
Click to expand...

systematic said:
I disagree with Lincoln indicators.

I have it ranked poorly overall. A poor value stock with nothing interesting happening, momentum wise.
Click to expand...

Lincoln dropped GEM as a star stock on 17 Feb 2015. They are now carrying too much debt. I've never owned GEM. If I did own it I would be selling. Even at today's prices Lincoln clients who bought when Lincoln first recommended the stock would be laughing.

I tipped GEM in the 2015 stock tipping comp because its a way for me to back a stock that I would not actually buy. One of the reasons i would not buy it is because I don't like the chairperson of the company. The reason why I tipped it is because in a frothy property market I thought it might have the legs to keep on going in the current market. Also, because of the expected boost to childcare to come from the anticipated new federal family package.

A strategy of growth by acquisition is going to eventually exhaust itself. Interest rate risk and debt servicing are risks that have grown due to the amount of debt this company is now carrying. If we are near the bottom of the interest rate cycle then the risks increase. They will need to demonstrate strong earnings growth going forward to pay down the debt.

The price is currently sitting around the 38% fibonacci retrace level of the rise since the GFC bottom.
 
GEM: G8 EDUCATION LIMITED

About time something positive being said about GEM: GEM:ASX : G8 EDUCATION LIMITED is being supported by Bank of America Merrill Lynch analysts who have come out in support for G8 Education, saying an underwritten dividend reinvestment plan and strong free cash flow would be enough to see off fears about an equity raising.
G8 shares have been heavily sold over the past six weeks on fears about the roll-up's balance sheet and its ability to fund future acquisitions.
"However after recent discussions with management, we do not believe an equity raising is imminent," BAML analysts told clients this morning.
"GEM's acquisition pipeline is for a lesser 80-100 centres pa (vs more than 200 last year), which allows for a large part of the company's acquisition growth to be internally funded."
BAML said internal funding sources included the $50 million to $60 million fully underwritten DRP, which could fund the acquisition of about 50 centres, $120 million forecast free cash flow and expected $150 million cash balance come the end of 2015.
The analysts also backed G8 to continue its strong growth and double its market share over the next three to five years.
"Despite GEM still being a 'roll up' play, it is no longer being priced that way having de-rated to 12.9x FY15e earnings (a 20% discount to market)," the analysts said.
"In our view, the market is effectively ignoring the consolidation opportunities in the sector and/or discounting management's ability to make successful acquisitions and earn a return above its cost of capital (despite its track record). Either way, we believe such a view to be unjustified and overly bearish."
 
Re: GEM: G8 EDUCATION LIMITED

CalpeInvestor said:
About time something positive being said about GEM: GEM:ASX : G8 EDUCATION LIMITED is being supported by Bank of America Merrill Lynch analysts who have come out in support for G8 Education, saying an underwritten dividend reinvestment plan and strong free cash flow would be enough to see off fears about an equity raising.
G8 shares have been heavily sold over the past six weeks on fears about the roll-up's balance sheet and its ability to fund future acquisitions.
"However after recent discussions with management, we do not believe an equity raising is imminent," BAML analysts told clients this morning.
"GEM's acquisition pipeline is for a lesser 80-100 centres pa (vs more than 200 last year), which allows for a large part of the company's acquisition growth to be internally funded."
BAML said internal funding sources included the $50 million to $60 million fully underwritten DRP, which could fund the acquisition of about 50 centres, $120 million forecast free cash flow and expected $150 million cash balance come the end of 2015.
The analysts also backed G8 to continue its strong growth and double its market share over the next three to five years.
"Despite GEM still being a 'roll up' play, it is no longer being priced that way having de-rated to 12.9x FY15e earnings (a 20% discount to market)," the analysts said.
"In our view, the market is effectively ignoring the consolidation opportunities in the sector and/or discounting management's ability to make successful acquisitions and earn a return above its cost of capital (despite its track record). Either way, we believe such a view to be unjustified and overly bearish."
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Hi CalpeInvestor, welcome to ASF!

When quoting from other sources, please be sure to link to the original article so others know where the quote from. For those interested, the original article that CalpeInvestor quoted from can be found here: http://www.afr.com/street-talk/g8-e...of-america-merrill-lynch-says-20150326-1m8x7u
 
Now is the time to sell G8 Education Ltd
The $688 million funding gap
Basic fundamental analysis of G8 Education’s financials reveals that since 2007 it has been left with a growing funding gap of $668 million.
This $668 million consists of negative cash flows after investing of $572 million, dividend payouts of $68 million, $27 million in other financing cash flows, and $0.17 million in foreign exchange effects. This leaves G8 Education with a funding gap of $668 million. To offset this gap, G8 Education has had to increase its borrowings by $385 million and raise equity of $400 million to cover the shortfall.
Further, G8 Education’s return on equity (ROE) has consistently averaged a very poor 4.59% since 2007. In 2014, the company generated a ROE of around 13%. The only problem is that its growth-through-acquisition strategy has increased debt by 66% per year from $10 million to $352 million. Its debt-to-equity ratio is now at 42.83% in 2014.
Poor share price performance
In the past 12 months, G8 Education’s share price has dropped by around 21%, a massive underperformance when you compare it to the S&P/ASX 200 (Index: ^AXJO)(ASX: XJO), which is up around 4% during the same time. The share price, which is currently around $3.50 is a long way from its high of around $5.60 back in September 2014.
At its current price of around $3.50 and a P/E of around 20, I think G8 Education’s shares are still overvalued, even at these levels.

http://www.fool.com.au/2015/06/24/now-is-the-time-to-sell-g8-education-ltd/
 
GEM is really struggling to hold at $3.20 at around a 12 month low. Yet an announcement today, as I read it, was of a new major investor.

I've been a holder since $2.97. I don't want to panic sell but perhaps the $$ might now be better invested elsewhere?
 
Muschu said:
GEM is really struggling to hold at $3.20 at around a 12 month low. Yet an announcement today, as I read it, was of a new major investor.

I've been a holder since $2.97. I don't want to panic sell but perhaps the $$ might now be better invested elsewhere?
Click to expand...

I do not follow GEM8 but the last chart I did above post 127 on the 9/1/2015 shows we are now in an Elliot wave C which could find support at $2.81 which is 50% of the all time high and $2.78 is the 50% level of the all time range which are significant levels and I would definitely get out if it closes below here worst case is it could go all the way to $1.50 if those levels are broken which is also the 261.8% range for a wave C...keep an eye on it Muschu.
 
People are really starting to desert this one now.. Even the directors! The chairman Jenny Hutson now leaving.
If only I had worked out a way to short it :banghead:
 
a 12 month closing high on friday on decent volume. Any more opinions on the chart by our esteemed members; it does look like it could break out.

Or perhaps it's just a bit of a run due to it's dividend which should be announced soon?
 

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